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How to Make Your Money Grow: Bear Market Tips for Newbie Investors

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Easy access to market fundamentals have encouraged more people to take control of their investment portfolios. Natasha Che/PEXELS

Nowadays, money can be difficult to come by, and even more delicate to keep and grow.

States and cities, which have temporarily reopened local businesses in a bid to jumpstart the economy, are on the precipice of yet another shutdown, as the positive cases hit at record-high of 63,000 in a day.

As the economy fights to reboot, many are brilliantly using the pandemic as a clean slate to improve their investment portfolios. With the bourse down, there are plenty of common and blue-chip stocks available at a fraction of its pre-coronavirus cost.

Warren Buffett, arguably one of the most successful American investors of all time, captured it best: "Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, we must rush outdoors carrying washtubs, not teaspoons."

However, it is also important to note that while trading in the stock market has become easy with technology, making money from it requires a fundamental understanding of market trends. This is why fund managers will want to know your risk-tolerance, especially during such market volatility.

In recent years, commission-free trading applications have played a major role in democratizing and simplifying the process of stock market trading. This has reduced the need for costly brokerage services, which could up to $100 per transaction.

Still, these mobile applications - and the sense of control it gives its users - are not quick and easy routes to everlasting wealth and happiness. Avoiding perilous investment pitfalls, however, can help maintain the integrity of your investments, and help you reach your financial goals sooner.

Make Smart Choices and Long-Term Financial Targets

As a potential stock market investor, you should think hard about why you want to invest in stocks, especially when market crashes and recessions are inevitable. Is it because you want to get a cash windfall within the next six months, or you are focusing on long-term wealth creation?

If your answer is the former, then investing in the stock market may not be for you. The stock market can be a very long and arduous waiting game, where patient investors can reap the most rewards. With its unpredictable nature, there is no saying when you can get significant and consistent returns from your investment.

Should you decide to push through with investing in the market, it may serve you good as a new investor to invest in blue-chip stocks, which offer stable earnings, consistent dividend payouts, and potential for further growth. These include Alphabet (the parent company of Google and YouTube), AT&T, Proctor and Gamble, Visa, and Microsoft.

Truly Understand Your Level of Risk Comfort

Apart from how much you can invest, it is also crucial for you to understand how much you may be willing to lose.

From 2007 to 2009, the Dow Jones Industrial Average, S&P 500, and NASDAQ all suffered massive declines of over 50%, the worst stock market crash since the Great Depression. Imagine being a stock market investor at the time, and finding out that one fine day, your investments have been devalued by over half its original amount. Is this something that you would be able to take, or would you already consider this a disaster?

This is why it is very important to keep abreast of market updates and trends so that you can be equipped with solid facts that can help you make sound financial decisions, instead of reacting to negative market movements in a blind panic.

Aside from real-time price updates and market bulletins, stock market investors may benefit from SEC transcripts and analyses, as these provide current and historical insights on the companies that you would like to invest in.

Diversification Is the Way to Go

It is never smart to put all your eggs in one basket, especially with the basket being particularly rickety at the moment.

Having said that, owning stocks in companies across different industries can be a prudent way to maintain a stable portfolio. More seasoned investors even invest in stock markets overseas, so that they will not be tied to one exchange - and their share of risks - alone.

Select stocks in recession-proof sectors such as renewable sources of energy, consumer goods, energy and water utilities, technology, and healthcare, as these are staples that would always have a steady graph, mostly. Also, check on stocks that regularly pay dividends, as these will allow you to enjoy tangible returns from your investments.

But having all your trading accounts in one place, with real-time quotes, market updates, decades of historical data, and detailed consensus estimates from analysts can be a game-changer. If you are heading out into the world of investment, this free app developed by Atom Finance can help you make well-informed decisions in these pressing times.

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